eCommerce Update | FedEx and UPS Ground Shipments

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With a busy schedule, our family is a huge fan of Zappos. Order what you want in the convenience of your own home when you want it. We love the world class customer service and free shipping. Ordering is easy…. Load the shopping cart, proceed to checkout, hit “submit order”, and our purchases are shipped within 1-2 days to our front porch.

Returns are easy to process and shipping costs are free via our friendly neighborhood UPS Store. Pleased to report that Zappos is ahead of the curve by shipping our shoes with minimal voids minimizing both packaging material cost and waste.

FedEx and UPS Ground Shipping Changes

Earlier this summer, United Parcel Service (UPS) and FedEx both announced that they would change the way they charge for packaged shipments shipped via ground. Ground shipments are currently based on weight. Under the revised pricing, packaged ground shipments will factor in weight as well as dimensions. The policy changes for UPS and FebEx are effective December 29th, 2014 and January 1, 2015 respectively. This will most likely mean increased shipping cost for ecommerce companies.

A recent blog posting by the ecommerce solution provider, Gorilla Group titled “Commerce Alert: Upcoming FedEx and UPS Shipping Changes” highlighted the impact of these new pricing polices:

“… some analysts are forecasting that the change could impact up to 66% of ground package shipments and increased shipping costs for some merchants by up to 30%

The Gorilla Group also referenced the impact of these policy changes in a Bloomberg article titled “UPS Follow FedEx in Basing Prices on Size, Not Weight”. This article states that this change is “…designed to increase revenue and reduce costs…”. Impact to online retailers is detailed below:

“UPS expects the changes to discourage online retailer from shipping small, lightweight items in large boxes, taking up more space in trucks and raising costs.”

The Cost of Shipping Air (Revisited)

In a previous blog, “The Cost of Shipping Air” we highlighted our experience with a Lands End of an insulated lunch box. Over half of the carton consisted of air pillows for void filler.

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Under pricing structures in place charging only by weight, cost impact of shipping air was not an issue. However, cost will most likely increase with the new dimensional weight pricing in place. How many lunch boxes does Land’s End ship to customer each fall with the start of the new school year? What would the annualized cost impact be to Lands End under the new pricing?

eCommerce Packaging Strategies

Now is a great time for online retailers to review their current packaging strategies to determine the potential impact of the FedEx and UPS pricing policies. Companies should evaluate types of products shipped and current packaging methods for shipping cube efficiencies.

Here are a few more strategies:

  • Review your stock carton inventory. Are there sizes that would offer fewer voids when shipped?
  • Determine cost trade off of custom cartons vs. potential savings associated lower dimensional shipping weight costs.
  • Can you replace cartons with flat plastic or paperboard mailers? This will reduce the overall shipping cube and might reduce shipping cost.

With the new pricing policies coming online at the end of the year, now is a great time to be proactive and determine if there are better options to package and ship your products.   Here are a couple resources that might help you understand dimensional weigh for your shipments. Based on our family experience, it looks like Zappos already has a pretty good handle on this.

FedEx: Dimensional Weight Calculator

UPS: How to Determine Billable Weight

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Posted in Blog, eCommerce, Management, Supply Chain, Sustainability

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